The Connecticut Federal District Court recently issued its decision dismissing (with prejudice) all causes of action in a nationwide RICO Class Action brought against the firm’s clients, a set of real estate brokerage entities. Ron Giller, Partner in the firm’s New Jersey office referred the matter to Hartford Partner John Robinson, who along with Associate Nicholas Varney briefed the motion.
The Plaintiffs brought a nationwide class action on behalf of essentially all homebuyers since the 1970s. Plaintiffs claimed that a myriad of the nation’s top real estate entities conspired to elevate homebuyer’s commissions and, thus, violated the Racketeer Influenced and Corrupt Organizations Act (RICO). Plaintiffs’ theory was that the real estate entities defrauded homeowners by establishing and operating multiple listing services, and establishing a “Buyer Broker Commission Rule.” Plaintiffs claimed that continued use of these services constituted mail and wire fraud, which caused the millions of homebuyers to suffer substantial harm.
In response to this substantial claim, the Gordon & Rees team composed a comprehensive motion to dismiss on a myriad of personal jurisdiction, substantive, and equitable grounds. The real estate entities’ motion further argued that the civil RICO action was legally insufficient because it lacked the necessary predicate acts, failed to plead fraud with particularity, and that the anti-trust theory was flawed. The real estate entities argued that they did not conspire to inflate broker commissions, and there was nothing in the complaint to show otherwise.
After extensive contested briefing and oral argument, the Connecticut Federal District Court granted the motion to dismiss the Plaintiffs’ complaint with prejudice. The Court clearly held that Plaintiffs’ conclusory allegations of mail and wire fraud were not sufficient to support the RICO claim. The court further held that although the complaint assailed the Buyer Broker Commission Rule on the ground that it leads to higher home prices and is anti-competitive, the complaint did not allege any facts to suggest that the plaintiffs—or anyone else—have been deceived by any scheme or misrepresentation concerning the role of and payment arrangements with buyers’ brokers. To the contrary, the complaint includes allegations strongly suggesting that the plaintiffs and other homebuyers were not misled or deceived.
The decision dismissing the case with prejudice is a substantial victory for the client, who was facing a large exposure based on the scope and breadth of the nationwide class action spanning the past thirty years.